Let me just put this out there, I DID get an allowance as a kid. I never really had a choice otherwise but as I’ve gotten a little older and had a daughter of my own, I’ve definitely changed my tune about allowances altogether.

 

Even though my daughter is a few years off from understanding the concept of money and spending (right now we do all theErin's shoppping allowance spending on her) I think about things like this all the time.

That’s why I’ve decided I’ll never give an allowance to my daughter Erin. I’m going to use an entirely different strategy when it comes to helping Erin learn about earning, managing, and spending money.

I believe that there are a few solid values that kids should learn about money as soon as they can understand what spending and saving actually are. The first thing that I want my daughter to know is that money doesn’t just appear out of nowhere, and that money should be earned, not just given to you as an allowance.

Here are a few other things involving money that I’m working on teaching my daughter and she’s only 22 months at the time I’m writing this. I really don’t think it matters how old your kids are, it’s never too early to start…

 I believe in working for money, not waiting for handouts

Money shouldn’t just be given to you “because.” We learn to value the things that we work hard to get, not what’s given to us on a silver platter. I want Erin to know that it’s better to set a goal and work towards getting something you want (big or small) than it is to just have someone give it to you.

Money is no exception, providing unnecessary handouts and special privileges just because you can afford to give them to your children does nothing to teach your kids the value of hard work and setting goals to achieve their desired outcomes in life when it comes to money and a lot of other things.

I’m not saying to never spoil your kids, I’m just saying you probably shouldn’t make a habit out of it if you want them to stand on their own two feet with money early in life, like when they’re at college and your credit card is burning a hole in their pocket 😉

It doesn’t matter if your outcome is buying a five dollar toy or a $30,000 car, I believe the true value of the material things and experiences we have is realized by working for those things, and putting in the sweat and the effort that it takes to get what we want through our own efforts.

I don’t want my daughter to think that she deserves free handouts or special privileges. I want her to know that the best way to get the things that she wants is to put a plan together and work towards her goals. I don’t want her thinking that money will just start showing up if she’s patient enough, cute enough or whatever enough. I want her to be proactive and ambitious and I want her to be in control of her own destiny when it comes to money. I don’t believe an allowance will help her in that way.

I call it compensation, not an allowance

Working on a goal-oriented system designed to proportionately reward and compensate based on effort and consistency is definitely a better way to describe the type of financial arrangement that I plan on having with Erin, I’m going to call it compensation, let me explain…

Even though Erin isn’t old enough to receive an allowance at this point right now (she’s 22 months at the time I’m writing this), I think is soon as she’s able to spend money she should learn how to earn money. So if she wants money or things that cost money she’s going to have to work for them. I want her to get used to exchanging time and effort for the things she wants instead of just hoping they come along to her.

Deciding our children will have to work for the things they want is the easy part but actually implementing that ideology and sticking to it is a whole other animal altogether.

This takes planning on your part as a parent. Not only is it up to me to teach Erin that she has to work to get the things that she wants, it’s also up to her mom and I to help her figure out how much things cost, find fair ways to determine how many chores and assignments that we may give her for earning that money are worth in actual dollars or some kind of system like that, and how much you should save versus spend right now if she has some longer-term spending goals she’s working on like an expensive toy.

I want to encourage my daughter to dream big and think big

What if she’s seven years old and she decides that she wants something that costs $1500? Most parents would never spend that amount of money on their kids, but I think a little bit differently, I want to show Erin that big goals are attainable.

As far as I’m concerned, the bigger the spending goal, the better. I want to teach Erin to set goals and stick with them. Easy goals are easy, but larger goals take more time, consistency, and discipline.

Maybe she will need to work for months consistently for that $1500 item. As a parent, I believe it’s my job to show her that regardless of how large her wants and goals are, there is definitely a way to get there.

If my daughter wants something that costs a lot of my money or takes up a lot of my time (which can also cost me money) then this is something that I would actually encourage. Setting a goal, working hard to achieve it, and staying consistent is something that I want Erin to start making good habits around. I think it’ll pay off down the road by teaching her to be a good problem solver, a hard worker, and a person who is equipped with the best tools to make smart decisions about her money as an adult.

I want to build a strong work ethic and appreciation of money for Erin early in life

I vividly remember getting a $40 allowance per month from my parents from the time that I started high school to the time that I started working at my own a part-time job, which was a couple years later. It was really nice to have that steady money coming in every single month, but the issue was, I never thought it was enough.

No matter how much money my parents would hand me I always wished I had more. I always found other things that I wanted to buy or other experiences I wanted to have but I rarely did anything besides fantasizing about having those things.

I was getting a pretty good chunk of change for a 14-year-old, but I always felt like I didn’t have enough money and I always felt like I needed more cash. I was at the mercy of the generosity of my parents, and I felt that they weren’t being generous enough with me when it came to giving me money and giving me the things that I wanted. I was wrong, but I was so used to getting what I wanted for free that I thought I deserved more than I actually did.

I look back on the sense of entitlement that I had because of the handouts that I received it’s actually kind of embarrassing. I do feel better about it since I’ve moved past that type of arrangement with my parents now, but I’ve always wondered what a compensation style payment structure for chores and work around the house would have done for my sense of financial responsibility at a young age.

Although my parents were successful in business and were very smart with their money, I never really learned the street-smarts I needed to be as good with my money as they were until I went out on my own and fell flat on my face enough times that the pain got so bad I just changed.

The smartest thing my parents ever did (as far as allowances go) was to cut off my allowance as soon as I started to make a little bit of income from working. This made me want to work more. This made it easier for me to get the things that I actually wanted, and I had more money than I had ever had before because I was so motivated to get the things that I wanted by having that allowance cut off. I knew I had to go out there and get it done on my own.

Instead of buying me a car at age 16, my dad actually did a smart thing by waiting about six months past my birthday, telling me to start saving for a down payment, and that he would match that down payment so I could get a new car.

The car I wanted was about $10,000, so the down payment that I saved combined with his matching down payment wasn’t nearly enough to afford the car. He co-signed an auto loan for me (not always the smartest move for a parent to make for their kids) and I remember my first car payment was $155 a month.

Although I probably should’ve bought a beater instead of a nicer car, being responsible for making that $155 a month payment was some pretty solid training for making all the other payments that I’m now responsible for making as an adult.

I learned my most important financial lessons by getting the opportunity to earn more and take on a higher level of responsibility as a 16-year-old. I love my parents with all my heart and soul, but I think I can do better than that with my own daughter, and I think my parents will be proud when they see how smart Erin is with money and how humble she’ll be when it comes to spending and saving.

It pays to have a plan

I’m all baby steps. If you have a child that’s a developing an entitlement mentality that’s not in line with the mentality you want them to have, now is as good a time as any to start teaching them valuable lessons about responsibility and respect when it comes to money, it doesn’t matter how old they are.

If you’re giving your kids in allowance, it may not be fair to just cut them off. If you’re interested in having them work for what you give them as opposed to just giving them handouts, you could use this is a great opportunity to help them earn more money or have more of the things that they want. The important thing is that we teach our kids to work hard for what they want and to value what they have, even if they’re a toddler!

Good Planning, good saving, and Good Investing!

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